Shadow education secretary Ed Balls has called for the return of tax breaks for the games industry following the collapse of Realtime World.

Writing on his blog, the Labour leadership candidate criticised the coalition government for axing proposed measures to safeguard the future of the industry.

"The Tory-Lib Dem government is putting the future of the computer games industry in Scotland at risk,” he wrote. “The terrible news this week about Realtime Worlds could be just the start unless the coalition government rethinks its decisions, which are costing jobs and risking the recovery.

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"While Labour set out plans to support the industry in March, the new government axed it in June and the result is job losses in Dundee in August. These are the stark consequences of a government which cuts at any cost and seems to think that unemployment is a price worth paying."

Balls also raised concerns that the UK industry could be in danger of falling behind its competitors in countries such as Canada, where government support is provided.

Realtime Worlds entered administration earlier this week following poor sales of its online action game APB. Recent reports suggest that buyers from both sides of the Atlantic are interested in acquiring it.